Most of the entries you will have to make are simple: expenses, receipts, cash deposits in the bank, transfers between your accounts, etc. In the life of your organization, you will probably have to pay back some people or issue assets. This article explains how to do this.
The recording of a credit is done under specific conditions: in case of doubt, contact an accountant, who will be able to advise you.
This article deals with the following points:
- Definition of refund and credit note
- Principle to book the accounting record
- Book the entry in Springly
- Special case
Definition of refund and credit note
The definition of a credit note is simple. It is an operation that aims to correct or cancel an already issued invoice.
It is necessary to make a credit note, for example, to correct an invoice in order to respect the accounting obligations. Indeed, in accounting, it is forbidden to delete or alter documents. In case of error, it is not possible to simply modify the first invoice, it must be canceled by a credit note.
Credit can be used in different situations. Example:
- In case of an error on the invoice: if you have made a mistake on an invoice that has already been sent to your customer or member, you must imperatively issue a new one in order to account for the difference in amount, or with the right information. For example, if you have invoiced 550 euros of goods instead of 500 euros. The credit note will mention the 50 euros of overpayment.
- In case of a commercial gesture: it can be useful to give a discount to a customer or a member (to build loyalty or to compensate for an error on your part). However, if you want to give a discount when you have already sent an invoice, you have to issue a credit note so that your discount is recorded in the accounts.
The refund is made, for example, if your member has paid for a membership, a course or has purchased tickets for an event or products via your online store, and for a specific reason (e.g. cancellation of the event), he/she asks to be refunded the total or partial amount of the payment made to your association. It is the same principle as the credit note, except that you will have to enter the outgoing payment to your member (refund).
Principle to book the accounting record
You have recorded a membership for $50, the member has already paid and is requesting a refund. You agree to reimburse this person and therefore wish to record this entry in the accounts.
The refund entry is simply the reverse entry of the membership.
So, if your sales script looked like this:
The refund entry will look like this (in case you refund the person)
Book the entry in Springly
Let's keep the same example as before. You have recorded a membership of $50 in your accounts. You want to reimburse this person for the same amount.
Go to the Accounting > Book Entry > Expenses page:
With the Refund/Credit value entered, a new Refunded Account field is displayed below it.
To maintain accounting consistency, it is important to choose the same account as the one used when recording your revenue.
Enter the other fields on this page (the payment method used for the refund, the amount refunded, etc.). And save. The software will then make a refund entry.
Book a credit note (without refund)
You make a commercial gesture and wish to record a credit note canceling a receipt or to deduct from a future purchase. The principle is the same, except that no payment will be entered.
Open the Expense/Revenue entry page and select the Refund/Credit account field.
Enter the other fields on this page except for the Payment Method field and click on the Subsequent Payment option. Then click Save.
Reversal of the initial entry
The entry will be added to the list of payables and receivables on the Accounting > Journal book Entry > Payables and receivables page. If necessary, you can consolidate it with an existing income/expense to cancel it.
There are cases where you will only collect part of a membership or event registration.
- For payment in installments, if you and your member wanted to stop the next installments, and you have already received a part of his membership.
- For a one-time payment, in case of cancellation of a registration/event or error in the choice of the formulas by the buyer.
In the case of online payment, we do not handle partial refunds. As a workaround, we offer you to make a refund via an offline payment method.
For example, you have received a membership of $100 paid online or offline, and you want to make a partial refund of $50.
Since we do not handle partial refunds automatically (via the Refund All button), you can use the following workaround:
- Partial refund via offline payment (check, wire transfer or credit card)
- Create the corresponding accounting entry and link it to the third party concerned.
If the partial refund is made offline using the proposed solution, the software will not issue a credit note. You will have to issue it manually. More information is in this article.
To go further
You will find all the information on how to make a refund on payment of memberships, events, donations, etc. in this article.